Question: Explain mathematically the following statement: Cost minimization does not necessarily imply profit maximization, using the following information. Constrained-cost minimization problem The objective function is
Explain mathematically the following statement: "Cost minimization does not necessarily imply profit maximization," using the following information. Constrained-cost minimization problem The objective function is Total Cost TC = w x L + rx K and the constraint is | f(L,K) = Q* where: Prescribed output level Profit maximization problem Maximize{II = II (L,K)} Total Profit II = II (L, K) = TR - TC Total Revenue TR = P x Q, Q=f(L,K) Production function Total Cost TC = w x L + rx K
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